Supporters and opponents of legal marijuana in Colorado say the success or failure of an open retail market for the drug will have “huge implications” for neighboring states like Nebraska. This comes as those in the growing industry and the officials responsible for regulating it struggle to keep track of the inventory.

“This is an experiment in public policy,” said Ron Kammerzall, senior director of enforcement for the State of Colorado’s Marijuana Enforcement Division. “We’re going to see whether it works or not and see what the implications are and adjust accordingly as we go down that road.”

There is a tremendous amount at stake for the new pot industry and law enforcement in the region. Earlier this year The U.S. Department of Justice issued a memo to federal prosecutors stating, even if the drug is still illegal, marijuana prosecutions would not be a priority and federal prosecutors should concentrate on using the department’s “limited investigative and prosecutorial resources to address the most significant threats in the most effective, consistent and rational way.” As a result, federal law enforcement won’t step in unless there is strong evidence pot retailers are, among other things, supplying minors or exporting it beyond Colorado’s borders. (Read the DOJ memo here)

Arrest trends in states neighboring Colorado indicate it has been difficult to accomplish in the past few years. Seizures of large quantities of marijuana have become routine along interstate’s and major highways leading out of Colorado.

A high percentage of county law enforcement officials in Nebraska told NET News they beleive Colorado marijuana has impacted the drug trade in their area. (Chart: Michelle Kosmicki/NET Research Manger)

In Nebraska, an NET News survey of county sheriffs and prosecutors concluded 66 percent of law enforcement officials surveyed felt legalization of medical marijuana in Colorado impacted the illegal drug trade in their region. For officials serving along the I-80 corridor, the percentage seeing an increased impact rose to 82 percent. (The survey was conducted in cooperation with the Nebraska County Attorneys Association and the Nebraska Sheriffs’ Association. Read the full survey.)

Now that Colorado voters approved the use of recreational marijuana, which permits out of state visitors to buy and use, there are additional concerns about cross-border trafficking.

Colorado Attorney General John Suthers. (Photo by NET News)

“People for years have driven over the border from Colorado to Wyoming to buy fireworks. I guarantee you there’ll be people driving over the border from Wyoming to Colorado to Nebraska to Colorado to buy pot,” said John Suthers, Colorado’s attorney general. He has been a focal opponent of legal pot from the start. “And there’ll be a lot of pot diverted from marijuana grow operations in Colorado to other states. It’s inevitable,” Suthers added.

To date there have been few cases where it’s been clear the legal medical marijuana businesses have been a knowing participant in large scale trafficking.

“The big problem is people who are legally purchasing medical marijuana through a business and then taking it out-of-state themselves,” Michael Elliott said. He heads the Medical Marijuana Industry Group. “It’s a very difficult thing to stop and a lot of it just it comes down to law enforcement.”

It’s widely accepted Colorado’s early attempts to regulate the legal marijuana trade were troubled. Audits of the regulation system used by the State of Colorado (read the state audit) and the City of Denver (read the city audit) found serious flaws in almost every area. The report lead one state senator to call it a “dysfunctional system of tracking the marijuana.”

Tim Rayer grew up in Nebraska. The opportunity to grow pot legally, something he’d done illicitly in his Omaha basement, brought him to Denver. His office is a bleak cinder-block warehouse, topped with razor wire, on the edge of downtown Denver. The buds and extracted oils harvested from dozens of plants inside end up behind the glass-covered counter of a nearby dispensary. Colorado residents with a doctor‘s approval and an patient card obtained from that state’s Department of Health are allowed to purchase. The day we visited he had just logged his 132nd consecutive weekly harvest.

The market, legal and illegal, was wide open when he first arrived. “The first year they weren’t watching anything,” Rayer said. With increased oversight he knows he could be visited at any time by an inspector. Not so just a year ago.

“Many people in the industry knew that they weren't being watched so it was very easy for these bigger warehouses to over-produce and allow product to go out on the illegal market,” Rayer explained.

Those who got into the business early also got a real-life example into the laws of supply and demand. “Everyone started over-producing and it just drove the price right now, because Denver was so saturated.”

It was an important lesson because a major goal of legalizing marijuana “is to take away the black market,” Kammerzall said, adding “or to at least significantly reduce the black market. Can you totally eliminate it? I don’t think so.”

Kammerzall admitted the compliance among growers and sellers has been “mixed” and they’ve encountered “good players and your bad players” when it comes to following the rules.

The State of Colorado restored much of the funding it had cut from enforcing pot regulation and it’s hoped stricter rules will help strengthen the legitimacy of the industry. “We believe that there’s no substitute for having the people go out in the field and doing the compliance checks,” Kammerzall said.

Representatives of the marijuana industry, having heard the ‘trust but verify’ approach of federal drug investigators, recognize there is an opportunity to become a model for the rest of the country.

“We’ve taken a lot of precautions here to make sure that marijuana isn’t being illegally diverted to kids or out-of-state and to help ensure that the funding is there to make this entire program work,” industry representative Elliott said. His group favors tough sanctions for sellers and growers who violate the rules. Penalties include losing their license to sell and even jail.

River Rock Wellness considers itself to be a model for inventory tracking and security in the marijuana trade. Behind the tastefully decorated showroom for its organic products are hundreds of lush plants waiting to be harvested. Some are in artificially lit grow rooms; others flourish in a newly-constructed outdoor greenhouse.

The dispensary's co-founder, Norton Arbelaez, pointed out every potted pot plant has a bar code on the side “so the regulator can come in here and actually scan, electronically scan, the bar code. What we are doing is controlling to the one-hundreth of a gram with what is grown and what is sold.”

The medical marijuana industry calls it “seed to sale” tracking.

By monitoring the progress and movement of every plant, every bud, and every bag of cannabis, growers and sellers hope to eliminate what the industry calls ‘diversion’ and police call ‘illegal pot.’

Attorney General Suthers is skeptical.

“Hard as you try and regulate it, seed to sale, systems and stuff like that, the reality is we have received reports from 37 states that have found dispensary packaged marijuana going into their states and these are states that do not have legalized medical marijuana,” Suthers said.

Michael Elliott, representing the marijuana industry, is more optimistic.

“Marijuana has been in states like Nebraska and all of our neighboring states for decades. Trafficking into those states is nothing new,” Elliott said. "At the same time, we’ve got to come up with realistic ways to work to address these problems.”

Editor's Note: Find more information on this reporting project including links to additional in-depth stories and our television documentaryon our "Marijuana Crossroads" page.